What does revenue performance mean?
Revenue performance uses revenue as a key performance indicator (KPI) to look at business growth efforts in more detail and make strategic improvements.
Revenue performance focuses on making more money for the business while hitting specific goals. It is mainly used to measure how well sales, marketing, customer success, product development, and go-to-market (GTM) efforts work.
On a big-picture level, it answers two:
- What tasks in the business bring in the most money?
- What can be done to make it bigger?
On a smaller scale, income performance is about looking at and improving the factors affecting how much money a business makes. Customer acquisition costs (CAC) and lifetime value (CLV) are mentioned, along with pricing tactics and customer turnover rates.
The success of revenue doesn’t show the whole health of a business because it doesn’t show how profitable the business is. To do that, businesses need to look at operational and financial statistics.
For example, a business might look at average revenue per user (ARPU) and cost to acquire a new customer (CAC) while running a marketing effort. With this knowledge, they can decide if going after that specific group of people is profitable or should shift their attention to something else.
Like words
Revenue cycle performance is a way to measure how well customers (or patients) are treated, how much money you make, and how much you spend on costs. It is used in healthcare and medical fields.
Using data to understand, control, plan for, and drive revenue growth is what revenue intelligence means.
Revenue performance management (RPM) ensures that a business’s revenue performance is at its best, even as its goals and organization change.
The Cycle of Revenue Performance
The revenue performance cycle shows how the success of a business is measured and improved over time.
Each business has its revenue success cycle, but the order of events is the same for all.
Getting the Data
The most important part of the income cycle is the first step, which is collecting data. Customer data shows how well efforts to increase sales are working, and getting the correct data is critical to improving them.
Here are some examples of revenue success indicators that customers gave us:
Polls and polls. When businesses release new items or updates, polls can help them determine how those changes affect their bottom line. For example, a poll can find the link between a new feature that makes a product more complicated to use and more people canceling their subscriptions. Customer service problems are why almost half of SaaS users stop using a product. Regular surveys can help find these problems.
Visitor and customer tracking. Businesses can find out which parts of their website their target people are most interested in by tracking visitors with tools like IP addresses, location data, and website analytics. They can also find out how people use their website and change how it works to make it easier to find essential goods and information.
- Data about transactions. A breakdown of past transactions, invoices, and recurring earnings by customer helps businesses figure out who spends the most and on what.
- Software for automating marketing. Companies that email, pay ads, and run social media campaigns can see how well each is doing and determine which platforms bring in the most leads.
- Online chat. Comments and posts on Twitter, Facebook, Instagram, TikTok, LinkedIn, and other sites are some of the best places to get information about your customers, but they can be hard to measure. Companies can use social listening tools to find keyword and mood trends in talks and then use that information to figure out whether they made or lost money.
Splitting up
When you look at the customer group, you can see significant trends and the biggest successes and failures. However, it doesn’t tell the whole story. Businesses need specific revenue analytics to figure out where to put more effort and where to cut back.
Companies can get a better idea of how their revenue plan is working by putting customers into “buckets” based on how they use their products, their subscription level, their lifetime value, the type of customer (e.g., enterprise or SMB), their industry, and where they live.
For example, a business might divide its customers into “big spenders,” “high risk,” and “low engagement” groups to see how loyal its customers are and how their buying habits change as it tries new things to make more money.
RFM (recency, frequency, monetary value) is another way to divide people into groups based on how often they buy something and who brings in the most money.
Making predictions
To do revenue forecasting, you use past data and predictive analytics to guess how much money you will make in the future. Forecasting models help businesses guess how much money they will make and help them take new steps that will help them reach their goals.
These days, income forecasting is mainly done by AI, but it still needs to be interpreted and decided upon by people with a stake in the matter.
Let’s say a software company in Silicon Valley opened an office on the East Coast last year. So they can figure out how much money they will make in the next 12 months, they want to know if they should double down on the East Coast market.
They will look at past sales data from different types of customers (e.g., East Coast vs. West Coast, business customers vs. SMBs) and use it to guess how each group will do in the future.
Then, they can look at each area individually and decide if it’s worth expanding that office next year based on the cost and the amount of money that could be made.
Making choices and getting the best results
It doesn’t matter how good a company’s data and math are; they can’t make business choices for them or consider all the factors that affect how well the company makes money.
Revenue optimization is hard to understand, even though some forecasting tools have optimization methods built in.
Should a business follow the data-driven, software-backed plan to make the most money?
Not all the time, but sometimes.
Even though making predictions and understanding customer demand curves is helpful, people still use their gut feelings sometimes.
Before making decisions about making money, there are a few essential things to think about:
- If prices go up or down, will that change what people want to buy? Is it dangerous to set prices too high or too low?
- Outside factors—Are there outside factors that predictions can’t consider, like new products that change how customers act?
- Competition: How do the pricing tactics of other businesses affect the market?
- Long-term thoughts: Do long-term effects matter more than improving short-term income performance?
Hotels in the path of a solar eclipse will be full that night. In 2017, during the Great American Solar Eclipse, they canceled the bookings of their current customers and put the rooms on the market for thousands of dollars more. This helped them in the short term but caused them to get bad news and lose money in the long term.
Reevaluation in Motion
DevOps teams must keep looking at their methods for making money and making changes as needed. Plus, they need to change and try new things, even if they might be risky. They can’t just stick to what worked before.
When a plan doesn’t work, it might be because of bad sales execution or broken operations. It could also mean that people have changed, and what you thought you knew about them is no longer valid.
You need to learn and change to use the revenue success cycle correctly. Many articles discuss how millennials are “killing” different businesses, goods, or industries.
This thinking isn’t helpful because it leaves out an important fact: companies that don’t listen to their customers and change with the times will lose in the long run.
Setting KPIs and benchmarks
When businesses can make sales consistently, it’s easier and more predictable for them to hit their revenue goals. They can do that by setting and keeping track of sales KPIs and income metrics.
These are sales goals, close rates, and average deal size for sales teams. Marketing teams look at impressions, click-through rates (CTRs), conversion rates across all marketing platforms, and cost per lead or customer acquisition costs (CACs).
What does revenue performance management mean?
Revenue performance management, or RPM, is a set of activities and methods to improve revenue performance across the revenue cycle.
RPM is usually done by the revenue management or RevOps team. It involves figuring out how customers behave, guessing how much money the business will make, and developing new sales and marketing plans to make more money.
RPM uses data analytics, best practices, and market information to help make choices about pricing, product development, customer segmentation, marketing mix optimization, etc.
The main goal is to make as much money as possible by watching sales, using accurate forecasting models, and making intelligent decisions.
Why it’s essential to manage revenue performance
Revenue performance management is essential because it keeps track of and studies all the different ways money comes in.
To increase bottom-line sales, you need an RPM plan because it:
- It helps businesses set better prices and decide what to sell using data-driven insights.
- Helps with marketing efforts, sales strategies, and improving the customer experience.
- It helps managers find ways to make more money and cut costs while knowing how these changes will affect the people they want to buy from.
- Offers accurate prediction models that help guess what customers will want.
- It helps improve product offers so that they make the most money.
- It allows teams to check their progress, set goals, and meet those goals.
- It tells the Chief Revenue Officer (CRO) and other business leaders how to increase their market share.
How to Keep Track of and Measure Sales Performance
It’s not as complicated to keep track of income performance. All you have to do is set up KPIs and metrics, keep track of performance throughout the sales pipeline, and then compare results to make continuous improvements.
Find KPIs for revenue performance.
To start using KPIs, you should get a complete picture of all the data points related to your customers. This should include information about contacts and leads, the success of your sales reps, your marketing campaigns, and your close rate. This helps you see which parts of the sales process are getting better (or worse).
Then, set measurable success indicators for each team, product, or customer segment to see how well they make money.
Some KPIs that you should keep an eye on are:
Total money made (for all customers and each one)
- The most common deal size
- Sales by place
- How much does it cost per lead?
- Rate of lead-to-customer conversion
- Close rate: the share of leads who turn into paid customers
- Rate of customer engagement
- Rate of turnover
Collect information on how well your revenue is doing.
Data should be gathered in real-time from various sources, such as analytics platforms, customer relationship management (CRM) systems, marketing automation tools, and customer service ticket systems. As it is gathered, it should all be put in one place so that it is easy to find and analyze.
This gives businesses a complete picture of the customer journey and how each sales cycle is staged.
This is simple with an integrated RevOps tech stack; teams can check, keep track of, and study all user data sources in one place.
Look at the sales funnel.
Managing the sales funnel is an essential part of an RPM plan. From getting the lead to converting it, it helps businesses see how leads move through the sales process.
Critical points of sales funnel awareness that affect how well a business makes money are:
- When do buyers stop being interested in buying?
- What kinds of people are most likely to buy?
- Possible sales per customer compared to their sales cycle time and cost per acquisition (CAC).
- Which programs bring in the most money?
Find places where things could be better.
Sales funnel research aims to find ways to improve the sales process so that more money is made. To do this, performance must be compared to industry and internal standards to set clear growth goals.
Analytics tools make it simple to check how team or business goals and plans stack against metrics like customer lifetime value (CLV), average deal size, close rate, cost per lead, and more. Based on the results, decisions can be made.
Software for managing revenue and performance
Most of the time, “revenue performance management” (RPM) software is a group of features and functions built into CRM, marketing automation, and analytics programs. Revenue teams can use these tools to do RPM tasks.
What It Does
The suitable RPM suite gives you the data and information you need to increase sales. It should have accurate models for predicting sales, tools for budgeting, the ability to automate marketing, and the ability to divide customers into groups.
It should also have tools for working together across departments, like a central place to store customer information.
Tracking sales is the primary job of any RPM software, and it should be simple to check against real-time success metrics.
The pros
Some of the benefits of RPM tools include:
- A better understanding of customer data points has helped the sales team do their job better.
- More accurate planning and spending for the future
- A better view of the sales process and customer acquisition costs (CAC)
- Better revenue success across all channels, with more helpful information for making important business decisions
- Better working together between groups
- Get your product to market faster with a better GTM plan
- More effective management with lower running costs
Adding things in
The RPM software that a company has depends on its tech stack. Some common combined parts are:
CRM stands for “customer relationship management.”CRM is the most essential part of any RPM system because it keeps track of customers throughout the whole process and is the only source of truth for customer data.
- They are automating marketing. Automation tools are necessary to send targeted, personalized ads, build relationships with prospects, and move them through the buying cycle.
- Software for CPQ.Configure, price, and quote (CPQ) software speeds up the process from quote to revenue and records sales and product information for each contact between a customer and a salesperson.
- Information about revenue. Analytics tools help you learn more about how your customers act and find ways to make the sales process better.
- It is taking care of subscriptions. Any business that sells monthly services needs a reliable way to keep track of usage and gather information that can be used to make the customer experience better.
- Billing and sending out bills. Billing and invoicing software handles a customer’s billing process, from sending bills to getting paid.
- Software for keeping track of money. Automatic revenue recognition and accurate financial studies ensure that everyone in the company always knows how their revenue is doing.
